Mongolia Cuts Rates for First Time Since 2009 to Support Growth

Mongolia’s central bank cut interest
rates for the first time since 2009 after determining that the
outlook for inflation is benign and deciding to “cautiously”
ease policy, its chief economist said.

The Bank of Mongolia reduced its policy rate to 12.5
percent from the previous 13.25 percent effective yesterday,
according to a table on the monetary authority’s website and
confirmed by chief economist Sandagdorj Bold. The central bank
is confident it will be able to achieve its 8 percent inflation
target for this year, Bold said in a telephone interview.

Mongolia’s gross domestic product growth moderated to 12.3
percent last year from a record 17.3 percent in 2011 after the
price of coal, the biggest export, fell. Slower growth in China,
which buys 92 percent of Mongolian exports, also reduced demand.

Inflationary pressure has eased as a result of fiscal
limits adopted by the government that have resulted in “more
disciplined” spending, Bold said.

Programs by the central bank to ensure the stability of
food, fuel, housing and transportation costs have also helped,
he said. Those efforts included providing loans to importers of
fuel, he said.

Mongolia’s central bank at the end of last year gave the
country’s fuel importers 83 billion tugrik ($59.7 million) of
loans after the companies said they may have to increase
gasoline prices, news website News.mn reported this month.

The nation’s economy has been spurred by a mining boom and
influx of capital to fund projects such as the $6 billion Oyu
Tolgoi copper and gold mine operated by Rio Tinto Group.

Mongolia exported 20.9 million tons of coal last year, down
from 21.3 million in 2011, according to the National Statistics
Office. The value of the exported coal in 2012 was $1.9 billion,
compared with $2.27 billion in 2011, according to the agency.